TIRUVALARGAL KRISHNADAS KIKANI Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE assessees in this batch of cases are dealers in cloth, cotton yarn, dyes in chemicals carrying on business at coimbatore. THEy are also exporters and importers of cotton, cotton yarn, dyes and chemicals. In the returns of asst. yrs. 1960-61 to 1965-66 in respect of a portion of turnover relating to sales of dyes and chemicals they contended that the sales are exempt at import sales. THEy contended that the sales were effected on forward or a float basis, that the importation of those goods was made by the Radha Dyeing Factory, hereinafter called as the purchasers, by paying the value of the goods including customs duty and that the assessees acted only as agents of the purchasers to whom the goods were sold. In this connection, they relied on a preliminary agreement between them and the purchasers as evidenced by their letter dt. 15th March, 1960 and a later formal agreement dt. 7th April, 1961. THE facts relating to these turn overs as evidenced by this letter and the agreement are as follows :- "in respect of their export of cotton yarn and cotton textiles under th cotton Textile Export promotion Incentive scheme, the assessees were granted import licences for the importation of textile chemicals, dyes and gums. THEse licences however were not transferable. Radha Dyeing factory agreed to purchase from the assessees imported dyes and chemicals. THE terms and conditions of such sale and purchase between the assessees and the purchasers are evidences by the letter dt. 15th March, 1960 and the formal agreement dt. 7th April, 1961. Under this agreement, the assessees agreed to sell to the purchasers on monopoly basis the imported goods on forward, afloat or c. i. f. basis. THE prices for each transaction will have to be settled by agreement between the parties. " * Towards the sale price, the purchasers have to pay to the sellers a premium at a certain percentages or a fixed amount as may be settled which would be the margin of profit of the assessees in the full or a portion of the sale price. On receipt of this money, the assessee would credit the sum in his books to the account of the purchasers treating the same as part of the sale proceeds received. As soon as the purchasers pay the premium or part of the price, the assessees agreed to hand over the licence or licences so as to enable the purchasers to take seeps to import the goods in the name of the assessee. THE assessees would place an order with the foreign sellers by the purchasers for the quantity of goods required by the purchasers. THEy would also open a letter of credit through a bank or otherwise. All the import documents would have to be in the name of the assessees and the assessees agreed to subscribe their signatures to all the papers and documents so as to make the importation possible. But the purchasers would have to pay the amount as per the invoices of the foreign sellers and also the customs and excise, dues, wharf charges, clearing and forwarding charges and all such other dues including sales-tax, if any payable. Even the bank charges for the opening of the letters of credit will have to be met by the purchasers. THE assessees also had to subscribe their signatures to all the documents to enable the purchasers to get delivery of the goods from the port through customs and the forwarding agents of the assessees and also render all possible helps to fulfil the terms of the agreement. If, after receiving the premium or part of the price as referred to above, the purchasers fail to take necessary steps for importation of the goods in the name of the assessees within the time allowed according to the licence or fail to utilise the licence or licences or cause the validity expired, the advance amount received by the assessees as part of the sale price is liable for forfeiture. THE agreement also provided that the assessees were at liberty after an advance information to the purchasers to make sales of imported goods to others or deliver the licence or licences at their option to anybody else, if the assessees were not able to get a fair profit from the purchasers.

(2.) ON these facts, the assessing and appellate authorities held that there were two sales, one by the foreign sellers to the assessees which was an import sale and another, a sale by the assessee to the purchasers which was a local sale and that the turn-overs relating to the local sales were liable to be assessed under the Tamil Nadu General ST Act. The assessment orders relating to the asst. yrs. 1960-61, 1961-62 and 1963-64 to 1965-66 were taken in appeal to the ST Tribunal, Coimbatore, while the assessment order relating to the asst. yr. 1962-63 was taken in appeal to the st Tribunal, Madras. The Madras Tribunal held that there were no two sales, that the agreement between the purchasers and the assessees and the contract of sale between the assessee and the foreign sellers were two integrated transactions forming one import sale and that therefore the turnover in question was not liable for sales-tax. ON the other hand, the Coimbatore tribunal held that there were two contracts for sales, one between the assessees and the purchasers and another between the foreign seller and the assessees and that only the sale the foreign seller to the assessee was an import sale and the sale by the assessees to the purchasers was liable to sales-tax. Against the order of Coimbatore Tribunal, the assessees have filed tc Nos. 461 to 465 of 1970 and against the order of the Madras Tribunal, the department has filed TC No. 52 of 1972.